The KAFTA agreement will eliminate tariffs on major exports to Korea, such as beef, wheat, dairy, sugar, wine, seafood, grapes, cherries and mangoes. It will open up new markets in education, telecommunications, financial accounting and the law.

Opposition Bill Shorten has welcomed the agreement.

Details of Australia’s trading arrangements with Korea are shown below.

ABBOTT: I am pleased to inform the House that the Minister for Trade and Investment has successfully concluded negotiations for a free trade agreement between Australia and the Republic of Korea. The Republic of Korea is Australia’s third largest export market. Under this agreement, tariffs will be eliminated on Australia’s major exports to Korea, and there will be significant new market openings in services and investment. Tariffs will be eliminated on items such as beef, wheat, dairy, sugar, wine, seafood, grapes, cherries and mangoes. Beef tariffs, I am pleased to say, will be completely phased out over 15 years, which will restore Australia’s competitive position in this key market. Australian automotive suppliers will benefit from the immediate removal of tariffs, as will the wine industry. The free trade agreement will provide new market opportunities for Australian services in education, telecommunications, financial accounting and the law.

The concluded negotiations will now go to cabinet for final consideration and to the Joint Standing Committee on Treaties for consideration. Conclusion of this free trade agreement will see the delivery of a key election commitment. Conclusion of this agreement will be good news for our exporters, good news for our farmers, good news for jobs, good news for growth and good news for Australia. I do acknowledge that the negotiations for this free trade agreement were commenced in 2009 under the former government. I congratulate the Minister for Trade and Investment for bringing them to what looks very much like a successful conclusion.

SHORTEN: We welcome the Prime Minister’s announcement. Australia and the Republic of Korea are strong friends in both war and peace. We are partners in economic, political and strategic matters, and share common values and interests. A free trade agreement with the Republic of Korea presents significant opportunities for Australia. It was former Prime Minister Rudd and Korean President Lee Myung-bak who agreed to launch bilateral FTA negotiations.

The opposition recognises that reducing barriers to trade can boost our economic growth, create more competitive industries and provide consumers with access to a wider range of goods and services at lower prices. The pursuit of these objectives drives Labor’s support for a more open global trading system. Labor believes the Asian century is at the centre of our national debate and has opposed protectionist responses to the global financial crisis both at home and abroad.

Labor also successfully negotiated the ASEAN-Australia-New Zealand Free Trade Agreement and FTAs with Malaysia and Chile. Labor had an ambitious agenda for trade in office and we will maintain our commitment in opposition. However, we respectfully request that senior government officials provide a briefing to the opposition at the earliest possible time and that the government release details of the agreement that the Prime Minister has announced as soon as possible so it can be reviewed and assessed. We wish to appreciate its impact on our budget and our economy. Not least of all, we want to ensure that Australian jobs are supported and maintained, and that Australian opportunities are available in the future to ensure that our national interest is advanced.

Building stronger trading relationships in Asia was a key election commitment and part of the Coalition’s plan to build a strong, prosperous economy.

As a result of the Agreement, tariffs will be eliminated on Australia’s major exports to Korea and there will be significant new market openings in services and investment. The FTA translates to higher economic growth and more jobs for Australians.

As part of the FTA, tariffs of up to 300 per cent will be eliminated on key Australian agricultural exports such as beef, wheat, sugar, dairy, wine, horticulture and seafood, as well as resources, energy and manufactured goods.

The FTA will also provide new market opportunities in Korea for Australian services in education, telecommunications and a range of professional services including financial, accounting and legal services.

The benefits of the FTA start flowing immediately and will be long-lasting. Independent modelling shows the Agreement would be worth $5 billion between 2015 and 2030 and boost the economy by around $650 million annually after 15 years.

Agricultural exports to Korea will be 73 per cent higher after 15 years as a result of the FTA and overall exports to Korea will be 25 per cent higher resulting in the creation of more than 1700 jobs.

Australian automotive suppliers would benefit from the immediate removal of tariffs as high as eight per cent; the wine industry from tariffs of 15 per cent and Australian wheat growers, potato farmers and cherry, grape and mango producers would all stand to benefit.

The Agreement also opens up opportunities for creative collaboration between Australia and Korea with producers able to develop screen content for the international marketplace.

The FTA secures Australia’s position in a major market where competitors like the United States, European Union and ASEAN countries are already benefitting from preferential access.

Minister Robb and his Korean counterpart, Trade Minister Yoon, concluded negotiations earlier this week. The Agreement will be signed and come into operation following domestic approval processes in Australia and Korea.

Bilateral trade between Australia and Korea reached $32 billion in 2012 and this agreement will help take that to a new level.

Australia and Korea are natural partners and this FTA will bring our economies and societies even closer and underpin a strong relationship for years to come.

Text of information provided by the Department of Foreign Affairs and Trade.

Australia and Korea FTA (KAFTA) – Key outcomes

Korea is Asia’s fourth-largest economy with a population of 48 million people. It is Australia’s third-largest export market and our fourth-largest trading partner. The Korea-Australia Free Trade Agreement (KAFTA) will benefit Australian exporters, importers, workers, consumers and investors by opening markets and freeing trade and investment between Australia and Korea. With one in five Australian jobs linked to trade, this agreement will provide an important boost to Australia’s economy.

Securing Australia’s competitive position in Korea

The FTA secures Australia’s competitive position in this major market, where our competitors – such as the United States, European Union and ASEAN countries – are already enjoying preferential access. Independent modelling shows the impact on Australia from the US and EU’s FTAs with Korea would be significant, reflecting Korean importers’ choice to source beef, sugar and dairy products from these markets. If we do not proceed with an FTA, our exports to Korea would be 5 per cent lower by the time the US and EU’s agreements are fully implemented (by 2030). Korean imports of Australian agricultural goods would decline by 29 per cent by 2030, with mining and manufacturing exports also declining, by 1 and 7 per cent.

Benefits of KAFTA

The results of independent modelling show the FTA will be worth over $5 billion in additional income to Australia between 2015 and 2030 and will result in an annual boost to the economy of around $653 million after 15 years of operation.

After 15 years of the FTA’s operation – by 2030 – our exports to Korea would be 25 per cent higher than they otherwise would have been.

By 2030, exports of agricultural goods to Korea would be 73 per cent higher than otherwise, contributing to a total 5 per cent increase in Australia’s total agricultural exports. Mining exports to Korea would be 17 per cent higher and manufacturing exports would be 53 per cent higher.

Increased exports under the FTA would create over 1,700 jobs on implementation.

Agriculture

The FTA will make a difference at the farm gate. From mango exporters, to macadamia nut growers to potato farmers, Australia will enjoy improved access to the Korean market. Tariffs of up to 300 per cent will be eliminated on key Australian agricultural exports, including beef, wheat, sugar, dairy, wine, horticulture and seafood.

Australia’s beef exporters will be big winners from the FTA. Australia is the largest supplier of beef to Korea but our major competitor, the US, is already benefiting from beef tariff cuts from its 2012 FTA with Korea. In beef, it currently has a 5.4 per cent advantage. The KAFTA will help Australian exports compete on a more level playing field and will enable Australian beef producers to capitalise further on Koreans’ growing taste for Australian beef.

Australian cheese producers will gain duty-free access to Korea’s growing and middle class market. Australian cheese exports currently face Korean tariffs of up to 36 per cent.

Australian sparkling, red and white wines are currently subject to a tariff of 15 per cent but wine from the US, EU and Chile enter duty free. The FTA will provide a boost to the wine industry, whose exports to Korea have been steadily decreasing since 2007. With this deal, Australian wines have the best chance to take advantage of a growing market.

Korea is already Australia’s biggest export market for sugar and exporters will enjoy immediate elimination of Korean tariffs on commencement of the agreement.

Other key beneficiaries of the FTA include Australian wheat growers, potato farmers and cherry, table grape and mango producers.

Services

The FTA will provide significant new market openings for Australian service suppliers, particularly in education, telecommunications, financial, accounting and legal services. This agreement represents some of the best services outcomes Australia has secured in any FTA.

For example, the agreement will allow Australian law firms access for the first time to Korea’s legal consulting services market by permitting Australian firms to establish representative offices in Korea and Australian lawyers to advise on Australian and public international law. Within two years, Australian law firms will be permitted to enter into cooperative agreements with local law firms, and within five years to establish joint ventures, and hire local lawyers.

An Audiovisual Co-production Agreement will deliver new commercial opportunities for our creative industries with an audio-visual co-production agreement – facilitating film and television collaboration.

Resources and energy

Resource commodities and simply-transformed manufactures accounted for three-quarters of the value of Australia’s merchandise exports to Korea in 2012 (approximately $18 billion). While many Australian mineral and energy exports to Korea enter duty free, Korea applies tariffs of up to eight per cent on a range of priority resource products. Under KAFTA, Korea will eliminate tariffs for all resources products over time (10 years).

Some of the resources products that will benefit from KAFTA include:

Crude petroleum

Natural gas

Unwrought aluminium

Gold

Propane

Ammonia

Sea salt

Unwrought lead

Cobalt mattes and articles

Titanium dioxide

Korea applies tariffs of up to 13 per cent on a range of manufactured products. Under KAFTA, Korea will eliminate tariffs for all manufactured products (not including energy and mineral resources or forestry products) within 7 years.

Some of the manufactured products that will benefit from KAFTA include:

Investment

KAFTA provides improved access and protection for Australian investors and investments in Korea. Australian investors are already active in Korea’s financial and infrastructure sectors, among others. Australia is open for business and welcomes further Korean investment. Korean investment has helped build Australia’s economic capacity in key industries. For example:

Korea Zinc’s investment in Townsville helps us to export zinc to the world.

Korean cutting edge technology is being used to construct the multi-million dollar North West Shelf floating LNG processing plant.

The FTA includes an investor-state dispute settlement mechanism. The Government has ensured the inclusion of appropriate carve-outs and safeguards in important areas such as public welfare, health and the environment. This will provide new protections for Australian investors in Korea as well as Korean investors in Australia, promoting investor confidence and certainty in both countries.
Sensitive sectors

It is true that some sectors may face increased competition from imports of Korean products and services, such as motor vehicles, automotive parts, steel products and textiles, clothing and footwear. This impact will be in line with the progressive liberalisation already underway in the Australia economy.

Snapshot of the Australia-Korea trade relationship

Total two-way trade reached $31.9 billion in 2012 – more than 5 per cent of Australia’s total international trade. In 2012, Australian exports to Korea were valued at $21.6 billion, accounting for over 7 per cent of all Australian exports. Total goods exports were valued at $19.8 billion. Korea is Australia’s largest market for sugar ($496 million). Total services exports were valued at $1.8 billion, comprising mostly education-related travel services ($754 million) and recreational travel services ($664 million).

Australia imported $10.3 billion of total goods and services from Korea in 2012. Of this, goods imports accounted for $9.9 billion. Services imports were valued at $455 million, including transport services of $218 million.

Growing bilateral investment

Bilateral investment between Australia and Korea is modest, but has grown significantly over the past decade. At the end of 2012, total Korean investment in Australia was $12.0 billion, up from $637 million in 2002. Over the same period, Australian investment in Korea increased more than three-fold, from $3.0 billion in 2002 to $10.4 billion in 2012.